CNB Financial Corporation Reports Third Quarter Earnings for 2017, Highlighted By Continued Strong Organic Loan Growth
CLEARFIELD, Pa., Oct. 19, 2017 (GLOBE NEWSWIRE) -- CNB Financial Corporation (“CNB”) (NASDAQ:CCNE), the parent company of CNB Bank, today announced its earnings for the third quarter and first nine months of 2017. Highlights include the following:
- Net income of $7.2 million, or $0.47 per share, in the third quarter of 2017, compared to net income of $6.4 million, or $0.44 per share, in the third quarter of 2016. The third quarter of 2016 included core processing conversion expenses and merger expenses totaling $308 thousand.
- Net income of $20.4 million, or $1.34 per share, during the nine months ended September 30, 2017, compared to net income of $15.5 million, or $1.07 per share, during the nine months ended September 30, 2016. CNB recorded realized gains on the sale of available-for-sale securities of $1.5 million and $1.0 million during the nine months ended September 30, 2017 and 2016, respectively. CNB recorded a gain on the sale of a branch of $536 thousand during the nine months ended September 30, 2017, and during the nine months ended September 30, 2016, CNB recorded prepayment penalties on long-term borrowings, core processing conversion expenses, and merger expenses totaling $3.6 million.
- Annualized returns on average assets and equity of 1.02% and 11.48%, respectively, for the nine months ended September 30, 2017, compared to 0.87% and 9.78%, respectively, for the nine months ended September 30, 2016. The annualized return on average tangible equity was 13.90% and 11.72% during the nine months ended September 30, 2017 and 2016, respectively.
- Net interest margin of 3.80% and 3.76% for the nine months ended September 30, 2017 and 2016, respectively
- Loans of $2.10 billion as of September 30, 2017 compared to loans of $1.80 billion as of September 30, 2016. Organic loan growth in the first nine months of 2017 was $225.0 million.
- Deposits of $2.06 billion as of September 30, 2017, compared to deposits of $2.02 billion as of September 30, 2016.
- Book value per share of $15.99 as of September 30, 2017 increased 9.2% compared to book value per share of $14.64 as of December 31, 2016 and tangible book value per share of $13.34 as of September 30, 2017 increased 13.4% compared to tangible book value of $11.76 per share as of December 31, 2016, as a result of both CNB’s retained earnings and its common stock issuance in the first quarter of 2017.
- Non-performing assets of $20.6 million, or 0.75% of total assets as of September 30, 2017, compared to $16.4 million, or 0.64% of total assets, as of December 31, 2016.
Joseph B. Bower, Jr., President and CEO, stated, “The third quarter shows the positive trend in earnings from the almost two year shift in the balance sheet from investments to loans. We will continue to focus on organic customer growth across all brands to further enhance future earnings.”
Net Interest Margin
Net interest margin on a fully tax equivalent basis was 3.80% and 3.76% for the nine months ended September 30, 2017 and 2016, respectively. The yield on earning assets increased 17 basis points from 4.31% for the nine months ended September 30, 2016 to 4.48% for the nine months ended September 30, 2017. Total interest and dividend income increased from $69.5 million for the nine months ended September 30, 2016 to $80.2 million for the nine months ended September 30, 2017. In addition, CNB recorded $2.3 million in interest expense for the nine months ended September 30, 2017 resulting from the issuance of $50 million in subordinated debt on September 29, 2016 to help support balance sheet growth.
Asset Quality
During the three and nine months ended September 30, 2017, CNB recorded a provision for loan losses of $1.4 million and $3.6 million, as compared to a provision for loan losses of $622 thousand and $2.0 million for the three and nine months ended September 30, 2016. Net chargeoffs during the three and nine months ended September 30, 2017 were $819 thousand and $2.0 million, compared to net chargeoffs of $907 thousand and $3.1 million for the three and nine months ended September 30, 2016. CNB Bank net chargeoffs totaled $392 thousand and $1.0 million during the nine months ended September 30, 2017 and 2016, or .03% and .08%, respectively, of average CNB Bank loans. Holiday Financial Services Corporation, CNB’s consumer discount company, recorded net chargeoffs totaling $1.6 million and $2.0 million during the nine months ended September 30, 2017 and 2016, respectively.
The increase in the provision for loan losses recorded in the nine months ended September 30, 2017 compared to the same period of 2016 is primarily attributable to stronger organic loan growth experienced 2017 compared to 2016.
Non-Interest Income
Net realized gains on available-for-sale securities for the nine months ended September 30, 2017 were $1.5 million, including $1.4 million on the sale of two structured pooled trust preferred securities. Net realized gains on available-for-sale securities for the nine months ended September 30, 2016 were $1.0 million, including $922 thousand on the sale of two structured pooled trust preferred securities.
As a result of CNB’s continued focus on growing its Private Client Solutions division, wealth and asset management revenues were $2.8 million in the first nine months of 2017, an increase of 20.8% from $2.3 million in the first nine months of 2016. During the quarter ended September 30, 2017, CNB recorded $592 thousand in income from bank owned life insurance policies, including $301 thousand representing the death proceeds on life insurance policies in excess of the cash surrender value.
Non-Interest Expenses
Total non-interest expenses were $17.6 million and $52.4 million during the three and nine months ended September 30, 2017, compared to $17.1 million and $50.7 million during the three and nine months ended September 30, 2016. Included in non-interest expenses during the nine months ended September 30, 2016 were $3.6 million of non-recurring items, which included merger related expenses of $481 thousand, costs associated with our core processing system upgrade of $1.6 million, and a prepayment penalty associated with the early payoff of long-term borrowings of $1.5 million.
Salaries and benefits expense increased $3.1 million, or 13.0%, during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. As of September 30, 2017, CNB had 490 full-time equivalent staff, compared to 471 full-time equivalent staff as of September 30, 2016. The staff added during this period included 17 employees for CNB’s newest division, BankOnBuffalo. Occupancy expenses increased $1.1 million, or 18.3%, during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, resulting primarily from two locations acquired from Lake National Bank in Mentor, Ohio in July 2016, as well as locations in Worthington, Ohio; Ashtabula, Ohio; Blair County, Pennsylvania; and Buffalo, New York that have been opened since the end of the third quarter of 2016.
About CNB Financial Corporation
CNB Financial Corporation is a financial holding company with consolidated assets of approximately $2.75 billion that conducts business primarily through CNB Bank, CNB Financial Corporation’s principal subsidiary. CNB Bank is a full-service bank engaging in a full range of banking activities and services, including trust and wealth management services, for individual, business, governmental, and institutional customers. CNB Bank operations include a private banking division, one loan production office, 33 full-service offices in Pennsylvania and northeast Ohio, including ERIEBANK, a division of CNB Bank, 9 full-service offices in central Ohio conducting business as FCBank, a division of CNB Bank, and a full-service office in Buffalo, New York conducting business as Bank on Buffalo, a division of CNB Bank. More information about CNB and CNB Bank may be found on the Internet at www.cnbbank.bank.
Forward-Looking Statements
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to CNB’s financial condition, liquidity, results of operations, future performance and business. These forward-looking statements are intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those that are not historical facts. Forward-looking statements include statements with respect to beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors (some of which are beyond CNB’s control). Forward-looking statements often include the words “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future conditional verbs such as “may,” “will,” “should,” “would” and “could.” CNB’s actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. For more information about factors that could cause actual results to differ from those discussed in the forward-looking statements, please refer to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of and the forward-looking statement disclaimers in CNB’s annual and quarterly reports.
The forward-looking statements are based upon management’s beliefs and assumptions and are made as of the date of this press release. CNB undertakes no obligation to publicly update or revise any forward-looking statements included in this press release or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise, except to the extent required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this press release might not occur and you should not put undue reliance on any forward-looking statements.
Financial Tables
The following tables supplement the financial highlights described previously for CNB Financial Corporation.
| (unaudited) | (unaudited) | ||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||
| (Dollars in thousands, except share and per share data) | |||||||||||||||||||
| 2017 | 2016 | % change | 2017 | 2016 | % change | ||||||||||||||
| Income Statement | |||||||||||||||||||
| Interest income | $ | 28,069 | $ | 24,958 | 12.5 | % | $ | 80,176 | $ | 69,497 | 15.4 | % | |||||||
| Interest expense | 4,552 | 3,025 | 50.5 | % | 12,468 | 9,219 | 35.2 | % | |||||||||||
| Net interest income | 23,517 | 21,933 | 7.2 | % | 67,708 | 60,278 | 12.3 | % | |||||||||||
| Provision for loan losses | 1,400 | 622 | 125.1 | % | 3,550 | 2,038 | 74.2 | % | |||||||||||
| Net interest income after provision for loan losses | 22,117 | 21,311 | 3.8 | % | 64,158 | 58,240 | 10.2 | % | |||||||||||
| Non-interest income | |||||||||||||||||||
| Service charges on deposit accounts | 1,244 | 1,162 | 7.1 | % | 3,499 | 3,149 | 11.1 | % | |||||||||||
| Other service charges and fees | 587 | 653 | -10.1 | % | 1,675 | 1,837 | -8.8 | % | |||||||||||
| Wealth and asset management fees | 952 | 795 | 19.7 | % | 2,775 | 2,298 | 20.8 | % | |||||||||||
| Net realized gains on available-for-sale securities | 5 | - | NA | 1,543 | 1,005 | 53.5 | % | ||||||||||||
| Net realized and unrealized gains on trading securities | 160 | 235 | -31.9 | % | 475 | 265 | 79.2 | % | |||||||||||
| Mortgage banking | 237 | 388 | -38.9 | % | 668 | 706 | -5.4 | % | |||||||||||
| Bank owned life insurance | 592 | 281 | 110.7 | % | 1,308 | 807 | 62.1 | % | |||||||||||
| Card processing and interchange income | 942 | 876 | 7.5 | % | 2,790 | 2,499 | 11.6 | % | |||||||||||
| Gain on sale of branch | - | - | NA | 536 | - | NA | |||||||||||||
| Other | 313 | 81 | 286.4 | % | 625 | 501 | 24.8 | % | |||||||||||
| Total non-interest income | 5,032 | 4,471 | 12.5 | % | 15,894 | 13,067 | 21.6 | % | |||||||||||
| Non-interest expenses | |||||||||||||||||||
| Salaries and benefits | 9,101 | 8,506 | 7.0 | % | 27,008 | 23,905 | 13.0 | % | |||||||||||
| Net occupancy expense of premises | 2,219 | 2,212 | 0.3 | % | 7,016 | 5,932 | 18.3 | % | |||||||||||
| FDIC insurance premiums | 295 | 387 | -23.8 | % | 869 | 1,049 | -17.2 | % | |||||||||||
| Core Deposit Intangible amortization | 305 | 347 | -12.1 | % | 967 | 779 | 24.1 | % | |||||||||||
| Prepayment penalties - long-term borrowings | - | - | NA | - | 1,506 | NA | |||||||||||||
| Core processing conversion costs | - | 42 | NA | - | 1,597 | NA | |||||||||||||
| Merger costs | - | 266 | NA | - | 481 | NA | |||||||||||||
| Card processing and interchange expenses | 541 | 587 | -7.8 | % | 1,577 | 1,670 | -5.6 | % | |||||||||||
| Other | 5,157 | 4,749 | 8.6 | % | 15,012 | 13,744 | 9.2 | % | |||||||||||
| Total non-interest expenses | 17,618 | 17,096 | 3.1 | % | 52,449 | 50,663 | 3.5 | % | |||||||||||
| Income before income taxes | 9,531 | 8,686 | 9.7 | % | 27,603 | 20,644 | 33.7 | % | |||||||||||
| Income tax expense | 2,285 | 2,270 | 0.7 | % | 7,194 | 5,144 | 39.9 | % | |||||||||||
| Net income | $ | 7,246 | $ | 6,416 | 12.9 | % | $ | 20,409 | $ | 15,500 | 31.7 | % | |||||||
| Average diluted shares outstanding | 15,207,589 | 14,381,888 | 15,103,629 | 14,368,013 | |||||||||||||||
| Diluted earnings per share | $ | 0.47 | $ | 0.44 | 6.8 | % | $ | 1.34 | $ | 1.07 | 25.2 | % | |||||||
| Cash dividends per share | $ | 0.165 | $ | 0.165 | 0.0 | % | $ | 0.495 | $ | 0.495 | 0.0 | % | |||||||
| Payout ratio | 35 | % | 38 | % | 37 | % | 46 | % | |||||||||||
| Average Balances | |||||||||||||||||||
| Loans, net of unearned income | $ | 2,075,147 | $ | 1,801,675 | $ | 1,992,406 | $ | 1,677,554 | |||||||||||
| Total earning assets | 2,544,418 | 2,343,221 | 2,485,045 | 2,226,469 | |||||||||||||||
| Total assets | 2,723,206 | 2,533,904 | 2,658,220 | 2,386,184 | |||||||||||||||
| Total deposits | 2,067,576 | 2,031,639 | 2,040,929 | 1,928,603 | |||||||||||||||
| Shareholders' equity | 243,931 | 215,342 | 236,940 | 211,363 | |||||||||||||||
| Tangible shareholders' equity (*) | 203,117 | 169,156 | 195,801 | 176,352 | |||||||||||||||
| Performance Ratios (quarterly information annualized) | |||||||||||||||||||
| Return on average assets | 1.06 | % | 1.01 | % | 1.02 | % | 0.87 | % | |||||||||||
| Return on average equity | 11.88 | % | 11.92 | % | 11.48 | % | 9.78 | % | |||||||||||
| Return on average tangible equity (*) | 14.27 | % | 15.17 | % | 13.90 | % | 11.72 | % | |||||||||||
| Net interest margin (FTE) | 3.82 | % | 3.88 | % | 3.80 | % | 3.76 | % | |||||||||||
| Loan Charge-Offs | |||||||||||||||||||
| Net loan charge-offs | $ | 819 | $ | 907 | $ | 2,031 | $ | 3,072 | |||||||||||
| Net loan charge-offs / average loans | 0.16 | % | 0.20 | % | 0.14 | % | 0.24 | % | |||||||||||
| The following is a non-GAAP disclosure of pre-tax net income excluding the effects of net realized gains on the sale of available for sale securities and one-time expenses including prepayment penalties on long-term borrowings, core processing conversion costs, and merger costs: | |||||||||||||||||||
| (unaudited) | (unaudited) | ||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| (unaudited) | |||||||||||||||||||
| 2017 | 2016 | % change | 2017 | 2016 | % change | ||||||||||||||
| Pre-tax net income, GAAP basis | $ | 9,531 | $ | 8,686 | 9.7 | % | $ | 27,603 | $ | 20,644 | 33.7 | % | |||||||
| Net realized gains on available-for-sale securities | (5 | ) | - | NA | (1,543 | ) | (1,005 | ) | 53.5 | % | |||||||||
| Gain on sale of branch | - | - | NA | (536 | ) | - | NA | ||||||||||||
| Prepayment penalties - long-term borrowings | - | - | NA | - | 1,506 | NA | |||||||||||||
| Core processing conversion costs | - | 42 | NA | - | 1,597 | NA | |||||||||||||
| Merger costs | - | 266 | NA | - | 481 | NA | |||||||||||||
| Pre-tax net income, non-GAAP | $ | 9,526 | $ | 8,994 | 5.9 | % | $ | 25,524 | $ | 23,223 | 9.9 | % | |||||||
|
(unaudited) September 30, |
December 31 |
(unaudited) September 30, |
% change versus |
||||||||||||
| 2017 | 2016 | 2016 | 12/31/16 | 9/30/16 | |||||||||||
| (Dollars in thousands, except share and per share data) | |||||||||||||||
| Ending Balance Sheet | |||||||||||||||
| Loans, net of unearned income | $ | 2,098,574 | $ | 1,873,536 | $ | 1,800,858 | 12.0 | % | 16.5 | % | |||||
| Loans held for sale | 1,672 | 7,528 | 2,814 | -77.8 | % | -40.6 | % | ||||||||
| Investment securities | 430,742 | 500,693 | 511,388 | -14.0 | % | -15.8 | % | ||||||||
| FHLB and other equity interests | 26,145 | 19,186 | 18,334 | 36.3 | % | 42.6 | % | ||||||||
| Other earning assets | 2,806 | 2,246 | 2,117 | 24.9 | % | 32.5 | % | ||||||||
| Total earning assets | 2,559,939 | 2,403,189 | 2,335,511 | 6.5 | % | 9.6 | % | ||||||||
| Allowance for loan losses | (17,849 | ) | (16,330 | ) | (15,703 | ) | 9.3 | % | 13.7 | % | |||||
| Goodwill | 38,730 | 38,730 | 38,967 | 0.0 | % | -0.6 | % | ||||||||
| Core deposit intangible | 1,888 | 2,854 | 3,200 | -33.8 | % | -41.0 | % | ||||||||
| Other assets | 162,361 | 145,378 | 177,969 | 11.7 | % | -8.8 | % | ||||||||
| Total assets | $ | 2,745,069 | $ | 2,573,821 | $ | 2,539,944 | 6.7 | % | 8.1 | % | |||||
| Non interest-bearing deposits | $ | 313,543 | $ | 289,922 | $ | 293,049 | 8.1 | % | 7.0 | % | |||||
| Interest-bearing deposits | 1,747,067 | 1,727,600 | 1,730,732 | 1.1 | % | 0.9 | % | ||||||||
| Total deposits | 2,060,610 | 2,017,522 | 2,023,781 | 2.1 | % | 1.8 | % | ||||||||
| Borrowings | 342,158 | 237,004 | 205,202 | 44.4 | % | 66.7 | % | ||||||||
| Subordinated debt | 70,620 | 70,620 | 70,620 | 0.0 | % | 0.0 | % | ||||||||
| Deposits held for sale | - | 6,456 | - | NA | NA | ||||||||||
| Other liabilities | 27,233 | 30,435 | 24,852 | -10.5 | % | 9.6 | % | ||||||||
| Common stock | - | - | - | NA | NA | ||||||||||
| Additional paid in capital | 96,697 | 77,737 | 77,543 | 24.4 | % | 24.7 | % | ||||||||
| Retained earnings | 147,132 | 134,295 | 131,643 | 9.6 | % | 11.8 | % | ||||||||
| Treasury stock | (544 | ) | (127 | ) | (163 | ) | 328.3 | % | 233.7 | % | |||||
| Accumulated other comprehensive income (loss) | 1,163 | (121 | ) | 6,466 | NA | -82.0 | % | ||||||||
| Total shareholders' equity | 244,448 | 211,784 | 215,489 | 15.4 | % | 13.4 | % | ||||||||
| Total liabilities and shareholders' equity | $ | 2,745,069 | $ | 2,573,821 | $ | 2,539,944 | 6.7 | % | 8.1 | % | |||||
| Ending shares outstanding | 15,285,236 | 14,467,815 | 14,464,210 | ||||||||||||
| Book value per share | $ | 15.99 | $ | 14.64 | $ | 14.90 | |||||||||
| Tangible book value per share (*) | $ | 13.34 | $ | 11.76 | $ | 11.98 | |||||||||
| Capital Ratios | |||||||||||||||
| Tangible common equity / tangible assets (*) | 7.54 | % | 6.72 | % | 6.94 | % | |||||||||
| Tier 1 leverage ratio | 8.44 | % | 7.87 | % | 7.70 | % | |||||||||
| Common equity tier 1 ratio | 10.14 | % | 9.28 | % | 9.56 | % | |||||||||
| Tier 1 risk based ratio | 11.12 | % | 10.33 | % | 10.67 | % | |||||||||
| Total risk based ratio | 14.45 | % | 13.83 | % | 14.32 | % | |||||||||
| Asset Quality | |||||||||||||||
| Non-accrual loans | $ | 19,231 | $ | 15,329 | $ | 15,325 | |||||||||
| Loans 90+ days past due and accruing | 592 | 10 | 70 | ||||||||||||
| Total non-performing loans | 19,823 | 15,339 | 15,395 | ||||||||||||
| Other real estate owned | 760 | 1,015 | 1,147 | ||||||||||||
| Total non-performing assets | $ | 20,583 | $ | 16,354 | $ | 16,542 | |||||||||
| Loans modified in a troubled debt restructuring (TDR): | |||||||||||||||
| Performing TDR loans | $ | 8,655 | $ | 8,710 | $ | 8,870 | |||||||||
| Non-performing TDR loans ** | 8,853 | 3,121 | 3,202 | ||||||||||||
| Total TDR loans | $ | 17,508 | $ | 11,831 | $ | 12,072 | |||||||||
| Non-performing assets / Loans + OREO | 0.98 | % | 0.87 | % | 0.92 | % | |||||||||
| Non-performing assets / Total assets | 0.75 | % | 0.64 | % | 0.65 | % | |||||||||
| Allowance for loan losses / Loans | 0.85 | % | 0.87 | % | 0.87 | % | |||||||||
| * - Tangible common equity, tangible assets and tangible book value per share are non-GAAP financial measures calculated using GAAP amounts. Tangible common equity is calculated by excluding the balance of goodwill and other intangible assets from the calculation of stockholders’ equity. Tangible assets is calculated by excluding the balance of goodwill and other intangible assets from the calculation of total assets. Return on average tangible equity is calculated by dividing annualized net income by average tangible assets. Tangible book value per share is calculated by dividing tangible common equity by the number of shares outstanding. CNB believes that these non-GAAP financial measures provide information to investors that is useful in understanding its financial condition. Because not all companies use the same calculation of tangible common equity and tangible assets, this presentation may not be comparable to other similarly titled measures calculated by other companies. A reconciliation of these non-GAAP financial measures is provided below (dollars in thousands, except per share data). | |||||||||||||||
| ** - Nonperforming TDR loans are also included in the balance of non-accrual loans in the previous table. | |||||||||||||||
| (Dollars in thousands, except share and per share data) | |||||||||||||||
| (unaudited) | (unaudited) | ||||||||||||||
| September 30, | December 31 | September 30, | |||||||||||||
| 2017 | 2016 | 2016 | |||||||||||||
| Shareholders' equity | $ | 244,448 | $ | 211,784 | $ | 215,489 | |||||||||
| Less goodwill | 38,730 | 38,730 | 38,967 | ||||||||||||
| Less core deposit intangible | 1,888 | 2,854 | 3,200 | ||||||||||||
| Tangible common equity | $ | 203,830 | $ | 170,200 | $ | 173,322 | |||||||||
| Total assets | $ | 2,745,069 | $ | 2,573,821 | $ | 2,539,944 | |||||||||
| Less goodwill | 38,730 | 38,730 | 38,967 | ||||||||||||
| Less core deposit intangible | 1,888 | 2,854 | 3,200 | ||||||||||||
| Tangible assets | $ | 2,704,451 | $ | 2,532,237 | $ | 2,497,777 | |||||||||
| Ending shares outstanding | 15,285,236 | 14,467,815 | 14,464,210 | ||||||||||||
| Tangible book value per share | $ | 13.34 | $ | 11.76 | $ | 11.98 | |||||||||
| Tangible common equity/Tangible assets | 7.54 | % | 6.72 | % | 6.94 | % | |||||||||
Contact:
Brian W. Wingard
Treasurer
(814) 765-9621
